Bill Nguyen: The Boy In The Bubble

What Bill Nguyen lacks in size at a wispy 135 pounds he makes up for in energy. The gregarious kind of energy that's as light as the path of a Frisbee, lobbed back and forth forever. It's the kind that has him walking into a room flailing his hands into the air like a juggler when he's only just welcoming you to his office in downtown Palo Alto. It's the kind that makes him gush like a teenage girl when his engineers develop a new feature for his app. It's the kind that lets him stay up all night, fueled by CokeZero and 5-Hour Energy shots, so he can tinker with his new products and still play ping-pong with his developers in the morning, and generally pretend, as everyone else does in Silicon Valley, that he's 20 years old, not the 40 he turned this year. It's the kind that drives his wife nuts because he always talks his way out of traffic tickets. It's the kind that in high school won him the title of president of the Black Student Union, despite not being, well, black. It's the kind that, as Tyra Banks would say, puts his eyes in an almost perpetual Botox-frozen state of "smizing" (smiling with your eyes). "There's a great thing Don King says," smizes Nguyen, quoting his general outlook on life. "The fight's only interesting if people show up."

"The concept of a bubble helps us. It makes it sound more magical than it actually is," says Nguyen.

That certainly was the case last March when Nguyen (pronounced win) had locked in the attention of virtually every venture capitalist, entrepreneur, tech journalist, and app fiend. A little more than a year prior, Nguyen sold Lala, a cloud-based music service, to Apple for a reported $80 million. Depending on how you're counting or who's doing the telling, it was his third or seventh startup. After 10 months of working for Steve Jobs in Cupertino, Nguyen decided it was time to move on and launch another. "As I spent time there, I realized what Apple had done is they'd ushered in this post-PC world," says Nguyen. "I started thinking a lot about how we would take advantage of that because this post-PC world was big." He didn't know what the company would be, but after more than 15 years in the Valley as a serial entrepreneur—including one startup he sold at age 29 for $850 million—it wouldn't matter. With his new venture, Color, he would deploy his signature formula: Raise some venture backing (in this case, $16 million), hire the best engineers he could find (six of them), and throw them in a space (a 22,000-square-foot storefront) until they stumbled onto the big idea.

Nguyen's team spent the first few months toying with becoming a "Pixar for mobile," a plan that would have started with an augmented-reality game called Furr, in which as "this furry creature you would basically colonize the world," Nguyen explains, and "everywhere you went physically with your phone, buildings would emerge." But after three months, he decided people wouldn't want to walk through life with their phone in front of their eyes. Then in December, his team had a bold idea: a social network built for the mobile age. Color, as he eventually named it, would be a photo app that would not require a user name or password; instead, photos taken by other Color users within 150 feet would appear in your "elastic network," a visual queue that would shift depending on people's location and level of interaction. The premise was to create a mobile social network of people you didn't know, rather than ones you already did. Nguyen believed Color would be the Facebook killer. "When Steve"—whom Nguyen refers to often by single name, like Madonna or Cher—"describes the post-PC world, all the things that were written in the PC world are almost doomed to fail.

Everything that Facebook built as a technology was based on old technology. It was all around this premise that you'll sit in front of this machine that has no idea who you are, so you have to tell it—who you are and what you like," Nguyen told Fast Company in March before Color launched. "I do think Facebook is broken." Nguyen is the only child of two engineers, but he isn't one himself. He prides himself on being a "product guy." He designed Color's user interface and created new nomenclature around his revolutionary elastic network ("multilens," "visual bulletin," etc.). He shelled out $350,000 for the URL color.com and another $75,000 for colour.com. He hired some 30 more employees and scored two high-profile execs: Peter Pham, of Photobucket and BillShrink fame, was named Color's president; two weeks before launch, D.J. Patil, formerly chief scientist for LinkedIn, was hired as head of product. For weeks, Nguyen and his VP of marketing and communications, John Kuch, made the rounds with tech press from San Francisco to New York, hyping Color with bombastic declarations. "IBM didn't survive the PC, none of the PC guys survived the web, and I don't think any of the web guys will survive the post-PC world," Nguyen told Fast Company back then. (Never mind that IBM is a $100-billion-a-year company.) On March 23, his team released news that left the tech world in awe: Nguyen had raised another $25 million in venture backing from Sequoia Capital, bringing Color's total to $41 million. For an app. Before it had even launched.

"I make the same mistakes with every single startup," says Nguyen, pictured here at Color headquarters. "But I keep trying. Maybe I’m the Don Quixote of startups." Photo by Mark Mann

The debut of Nguyen's Facebook killer was scheduled for 5 p.m. PST that evening. But by late afternoon, Apple had yet to approve the app. Back at Color's offices, anxiety ran high. "We thought, This is awful. All this press is going to come out and people won't be able to get the app," says Nguyen. If only he knew what was to come. With minutes to spare, the app got approved. People started downloading Color so quickly that it rocketed, briefly, to the No. 2 most-downloaded social-networking app—just behind Facebook. The developers were ecstatic that their brainchild was finally out in the world, even if most were ridden with a nasty stomach flu that had been circulating the office. "I don't get the sense people were exhausted," recalls Kuch. "I was tired because I was doing press for weeks and weeks."

VCs love Bill Nguyen's track record. They usually make money, even if the startups don't last long.

And then, that very night, everything came crashing down. Color execs started noticing that users were quick to rate the app a measly one or two stars out of five—nails in the coffin, given an oversaturated app market that was spawning more than 1,000 new apps a day. The problem was simple: In order for Color to work, many users had to be in a similar location, but since Color hadn't widely seeded the app prelaunch, users arrived to a social network that resembled a ghost town. "I wanna see that pitch deck," ranted influential tech blogger Robert Scoble. "It must have had some magic unicorn dust sprinkled on it." A mock satirical pitch deck began circulating around tech circles, spoofing Color's attempt to capitalize on every web 2.0 cliché: "People. Colors. Apps. Cats. Bacon. Organic. Bieber. Mobile. Social. Local. Pivot."

Six months after Color became synonymous with "bubble 2.0," Nguyen is readying Color's relaunch. Over the spring and summer, Nguyen fired president Pham; Patil, his head of product, resigned. The rumor mill geared up, most notably with the shocking (and unconfirmed) report that, before the launch, Google offered Nguyen $200 million for Color, only to get turned down. "It's become an ongoing joke," says Paul Kedrosky, a Silicon Valley investor and commentator, who says the startup is now the Valley's cautionary tale for a certain naive fervor for mobile and social networks. "It's become a punch line. You can stand up at VC events and say, 'Color,' and people literally laugh without anything else being said." Nguyen should be a wreck. Hardly. Over lunch at a diner in downtown Palo Alto, in August, he makes it apparent he's got other things gnawing at his mental space. "I'm going to crush them like a stepchild," he gloats. He's not talking about Color naysayers. He's talking about his own staff. They have downed one too many greasy meals of pizza and burritos, he explains, so they're now competing in their own version of The Biggest Loser. Nguyen, a surfer and snowboarder, doesn't have an ounce of extra body fat on his compact 5-foot-7 frame; still, he has hatched a plan to bury his employees. "I have a strategy to lose weight really, really fast, at a pace they can't keep up with. Then they'll be demoralized," he smizes, over his lunch of fruit salad and iced tea. "I don't care if I have to go to the hospital, I'm going to beat all of them. I'm not going to let them win. I refuse to let them win." The week before his final weigh-in, he tells me, all he'll consume is rice cakes and beef jerky. "I'm in every game. I play every game. Weight-loss game. Scrabble."

His right-hand man, Kuch, chimes in. "But you're in the startup game." Nguyen clarifies. "I'm saying it doesn't matter. If you want to play me in video poker, I'm going to still want to win."

"I never use anyone else's products but my own. I literally don't think there's anything to be learned from other people's stuff," says Nguyen.

Nguyen grew up in Houston, but Silicon Valley, his geographical home since he was 23, is his spiritual center. After all, the Valley is to entrepreneurs what Las Vegas is to slot-machine junkies. True, the tech industry can take credit for the past 20 years of GDP growth in America, more than manufacturing or the services industry. It has attracted the world's brightest young minds, has spawned society-changing innovations, and has inspired a new kind of American dream. Now every industry from advertising to entertainment tries to channel the risk-taking, failure-loving, innovation-seeking virtues of the Valley. But like Vegas, it has far more losers than winners. Some 90% of its venture-funded companies fail. Billions of dollars are invested in companies that never come close to becoming the next Facebook or Google.

In the weeks after Color's belly flop last spring, friends and colleagues were concerned that Nguyen might be humiliated, or devastated, or at least very stressed out by the $41 million of venture money invested in his failed product. But Nguyen understands the arithmetic of Silicon Valley, and anyway he isn't one to reflect. "I never get emotional," says Nguyen, who hasn't spoken to his parents in six years. "I can have the biggest argument with someone, and five minutes later, I won't even remember that it happened." He's not even particularly attached to his name. In third grade, he had a crush on a classmate whose mother asked him his name. "I go, 'Vu.' She goes, 'Bill,' and I go, 'Aha!' And all my friends have called me Bill since then," recalls Nguyen. "My whole point was, I don't care what people call me. It's like, whatever's easier for people, I'm totally cool with it." He adds, "There is no Vietnamese person in the history of the world born with the name Bill. It's a total facade."

Nguyen was so astounded by the condolence letters he received after Color's March fiasco that he did what any 14-year-old would do: turned it into a prank. In June, he bought an Eddie Murphy-style fat suit, took a photo of himself gorging a bag of Cheetos, and had one of his developers Photoshop a cascade of double chins around his face. He posted the photo, a mockery of the idea that the Color debacle had sent him into a downward spiral, on Facebook. Yes, Facebook. "My job is a game, it is a hobby," chuckles Nguyen. "It's a pretty good hobby—highly fun and highly entertaining."

Late in the afternoon on one of the three days I spent at Color Labs in August, Nguyen makes a pit stop at his desk on the way to a huddle with his developers. He fires up a carnival-size cotton-candy machine, a recent gift to himself that sits next to his computer. Curling his arm around the metal bowl, he spins the sugary blue fluff onto a paper cone. Armed with this late-afternoon sugar rush, he walks over to the developer war room and perches himself at the edge of a desk, folding up his compact frame like origami. Developers sporting 5 o'clock shadows and day-old T-shirts gather around their boss like a campfire, the room thick with the delirious exhaustion of gearing up for the relaunch. They're anxious to hear about the meeting Nguyen just returned from—with Facebook.

Two weeks after Color's botched launch, Nguyen had an epiphany. "It dawned on me that Facebook is the platform. This is the new operating system. I mean, you can't survive without it. It's the everything." Instead of trying, as he did with the original version of Color, to build a new operating system from scratch, why not just glom onto the most ubiquitous one? "I think that this evolution that's happened over the past six months is, 'Oh my God, there already is this great invention, and it's called Facebook,'" says Nguyen. "So we're about to make it more functional, more valuable for people than ever."

In some ways, Nguyen is most comfortable in this space, something those in the Valley like to refer to as "the pivot." This is the moment when a startup decides to change course. While outsiders may see this as evidence of a failed strategy, Nguyen and his coterie like to point out that Nguyen's biggest successes involved pivots, most notably with Lala. "The original idea was not what it became," explains Mike Krupka, a managing investor at Bain Capital Ventures who was an early Lala investor. "The original idea was CD sharing, which is how we ran the business for a year and a half. Ultimately, that model changed dramatically from CD sharing to digital cloud music."

What makes the Color pivot spectacular is that it is diametrically opposed to every pre-launch proclamation Nguyen made about Facebook. But just as Nguyen doesn't get particularly attached to emotion, he's not overly tied to his convictions. "I was totally wrong. I was just wrong. See, I don't have a problem being wrong," says Nguyen. He describes this as his mercenary nature. "When you're binary, you just pick a side; whether it's right or wrong doesn't really matter. You're all in. So you find out all the good and bad things about it instantly. When you find that it's not right, you just move on," he says. He claims that this "fail fast" philosophy allowed him to discover Color's flaws sooner than if he had run the company as a scrappy startup that had been iterating for months. "We learned a lot of things from the first release," says Nguyen. "But there was no way we could have known without doing it. I don't think we could have guessed them."

So now Nguyen is betting the house on Color's ability to work with Facebook. His inspiration is Zynga, the gaming company that has integrated itself fully into the social network. Zynga happens to be readying an IPO that values the company at $20 billion—and also happens to be founded and run by Mark Pincus, whom Nguyen worked for first in the mid-1990s at a startup called Freeloader, which was acquired for $38 million in 1996 (and shuttered a year later), and then at Support.com. "I'm so jealous of Mark Pincus, it's not even funny," says Nguyen of his friend. "Oh my God, unimaginably so. I always thought I was a better product person and should win, right? But he became a better CEO. I'm totally jealous. I totally want to build a bigger company than Mark's. Of course I do." He's hoping that Color on Facebook, as he calls the new version, will be as addictive as FarmVille. The app would allow mobile Facebook users to create, edit, and share group photo albums. And a new feature under the code name "Peek" would let users video each other via mobile phone, with their Facebook friends peering in. "Dude, it's the closest thing to transporting. Just the magic we need," he says. But, "if Facebook kicks us out, we're toast. Done. Dead."

Nguyen says his wife hates his dream home in Maui: "She thinks it’s emblematic of her husband, which is, He's obsessed with all things beautiful but cares less about whether it's functional or not." Photo by Mark Mann

Nguyen went unaccompanied to the demo meeting with Facebook's top brass, even though he had promised to bring a crew of Color execs. The twist was hardly atypical. Nguyen likes to add a level of game theory to everything he does. During his time at Apple, he wrangled meetings with every senior executive simply to gain access to every building in Apple's highly secured campus. When he gets in arguments with his wife, Amanda, whom he started dating when he was 19, he likes to employ a game he calls "the bank of goodwill." Explains Nguyen: "The cost to me to be right is so high and the reward is so low, I just lie. 'I'm so sorry, it's my fault,' I'll say. I walk away, and that's all I have to do. It works really well." Nguyen figured that going alone to the Facebook meeting would throw execs there off balance. "Since they feel like they've outnumbered me, they'll be really nice," he says.

"I will outlast everyone else," says Nguyen. "There is no one in the world who I won't outlast. There's no way. There's no way. There's no way."

While inhaling fluffs of blue cotton candy, Nguyen gives his team a mixed bag of feedback from the meeting. The Facebook team, he tells them, liked their "friend to friend" concept but felt it was too difficult to navigate between Facebook and the Color app. They were impressed by how much thought Color had put into the way people would consume content, but they wanted Color to think harder about how to get people to share content. "And," grins Nguyen, "they thought Peek was badass."

It turns out that before launching Color, Nguyen had barely even dipped his toe in Facebook. "I think it was all this stupid arrogance, like I was above it. Like Facebook is stupid," Nguyen says of his misstep. In the past few months, his Facebook profile has blossomed to more than 500 friends, and he posts photos daily. Says the entrepreneur now: "For me, [Facebook is] revolutionary because I never used Facebook before. Now I do." How could an entrepreneur who managed to get $41 million in backing have been behind the curve of grandparents all across middle America? "I have this other really bad trait," boasts Nguyen. "I never use anyone else's products but my own. I never do a competitive matrix ever. My entire life, I've never done it. I could care less what other people make. I have no interest whatsoever."

Kuch, Nguyen's handler, is sitting by his side during this exchange, and he rushes to massage his boss's confession. "I think you get it by osmosis because all of us push it to you," says Kuch, who resembles a young, tan Michael Douglas. Nguyen steamrolls over the suggestion. "I don't ever listen to any of it," he grins. "I mean, I literally don't think there's anything to be learned from other people's stuff."

That is exactly what happened with Color, which Nguyen never even bothered to test. "I'm not here to practice. I'm here to play," says Nguyen, citing Apple as a company that puts out breakthrough products that haven't been beta-tested endlessly. "That's Bill's entrepreneurial spirit," says Satish Dharmaraj, who cofounded OneBox.com with Nguyen and is now a general partner at Redpoint Ventures. "If he's going to take over a sector, he doesn't care what others are doing, he's going to build the best thing his mind can build." But just because Nguyen sold his company to Steve Jobs doesn't mean he is Steve Jobs.

Investor Kedrosky says entrepreneurs like Nguyen manage to get away with this hubris because it reinforces their auras as visionary entrepreneurs. "The fallback of the visionary is they say, 'I don't need to talk to people because there's no point in doing focus groups on revolutionary products,'" says Kedrosky. "But that's such a false dichotomy. No one is suggesting you make all of your decisions based on how people respond to surveys." Says Eric Ries, author of The Lean Startup: "The thing that requires the most courage in entrepreneurship is being willing to get the actual feedback about your vision and then still do it anyway. But it's easier to raise money and convince people you're a genius with an imaginary story and no business plan, versus having few customers and small results. It's a psychological thing."

In building that myth, Nguyen was aided and abetted by his investors. Believe it or not, they never insisted that Nguyen test the product beyond their inner circle. "The biggest mistake we made was that we all used the product and loved it," says Bain's Krupka, Color's first investor. Remember, Color was based on proximity; when the investment team tested the app with one another, they never encountered the "loneliness problem" that disappointed those early real-world users. Color board member Geoff Ralston, who was Yahoo's chief product officer before serving as Lala's CEO, now concedes, "I never thought it was that easy to use." And while the press release for Color's launch quoted Sequoia partner Doug Leone ("Once or twice a decade, a company emerges from Silicon Valley that can change everything. Color is one of those companies"), now no one at Sequoia will comment.

The first time Nguyen ever pitched a venture capitalist it was for a product he had never heard of. It was 1998, Nguyen was 27, and an entrepreneur had overheard him at a tech conference. "Three weeks later, he calls me and says, 'I have a meeting tomorrow with Kleiner Perkins, do you want to pitch?' I'm like, Well, what's the idea? 'We're going to send faxes over the Internet.' I'm like, Okay, I can pitch that," recalls Nguyen. "I never prepared a business model, nothing, literally just pitched the idea this guy told me in the parking lot." That night Nguyen went home, changed the name of the company from Ziptel to OneBox, expanded the company's business to web-based "unified messaging," went to another VC for backing, and, 18 months later, sold the startup for $850 million—two months before the dotcom crash.

"Bill's like an airplane," says a fellow VC. "He really knows how to take off a company and he knows how to land a company, and in the middle he needs a pilot."

Since then, Nguyen has been more comfortable pitching VCs than he is mingling at a dinner party. "I don't like cocktail parties," squirms Nguyen, who oddly likes to refer to himself as a recluse. "At the end of the day, what am I going to get out of it? I've known this person for seven years, we don't really know each other well, they've bounced from company to company, and I do the same thing—what do we have to talk about?" Nguyen's reclusion is of an attention getter's version. He tells stories about throwing private concerts and of every year going to Bonnaroo music festival, only to hide in some dark corner. While showing me around Color's space, he takes me to the basement where his new office will be, a cubbyhole that only someone of Bill's childlike size could crawl into. Despite his relentless charm, he professes not to care much for relationships, except for those with his two adopted sons and his wife, the latter the subject of an almost algorithmic strategy that preceded even their first date, back when he was 19 and she 16. "I had this whole theory," he says. "It was, I think I should meet someone as early in my life as possible, so that we would just get to know each other really well. That was my master plan." They married six years later in Maui. When Nguyen told a colleague at Apple that he was going to start a new kind of social network, the man "started laughing," says Nguyen. "He goes, 'You have no friends. What are you doing?'"

But pitching a room full of VCs? "Piece of cake. Oh, that's just like Fight Club, I'm on. Anytime there's dollars involved, it's like, game on," says Nguyen of raising the jaw-dropping $25 million from Sequoia. "It's funny because a lot of people, they think it's an achievement. I could care less. I could have gotten it from 10 other places. It didn't matter." Cameron Myhrvold, a venture capitalist at Ignition Partners who invested in Seven Networks, the only Nguyen startup besides Color that hasn't been sold to another company, raves about Nguyen's ability to raise money: "He's kind of a magician, a wizard."

Nguyen has been cultivating his sales skills since age 16, when he decided to strike out on his own. He had a tenuous relationship with his parents, Vietnamese immigrants who raised him in low-income housing. "I grew up not wanting to be poor. I always worried about that," says Nguyen, who describes his enterprising drive as a stark contrast to his "conservative Asian engineering parents." During high school, he hustled as a used-car salesman during the week while throwing warehouse raves on the weekends, which he says earned him upward of $5,000 a pop. The money paid for his Houston apartment, tuition at a Jesuit private school, and, eventually a Porsche. "His personality wasn't for everyone back then, especially authority figures like teachers," says Nguyen's close high-school friend, John Cogan, whom Nguyen later hired as general counsel for OneBox and Lala. "He was stellar at debate. He would just crush folks, in an unorthodox manner, but the teacher might not like what came with it. They'd think real hard about whether to bring him to an out-of-town debate, but they'd end up bringing him because he'd win them the trophy."

While in college at Houston Baptist University, Nguyen became a fund analyst at American Express. He eventually dropped out of school, but his three years in the investment business taught him everything he needed to know for a successful career in Silicon Valley. "A lot of people are good about reading financials on a company, trying to figure out what they did," recalls Nguyen. "I could care less what the company made. They could make balloons or elephants, it didn't matter to me—just what was the direction of the [stock] chart? I was really good at picking trends. If a trend changed, dump it. Take your losses, take your gains. Move." Nguyen's most lucrative talent may be his gift for storytelling. "He paints pictures with the best in the world," says Ralston. "And storyteller doesn't give it the richness it deserves. He's Jobsian in his ability to get you on his side." Ross Bott, CEO of Seven and former CEO of OneBox, says Nguyen tells a great story raising money but an even greater tale when he wants to sell a company. "He has what I call 'the Jedi,'" says Bott. "In order to get into a negotiation, you shouldn't be talking money first, you have to make the company anxiously wanting you, and ideally you have more than one company doing that so you can get a bidding war. And Bill is extraordinary at that first process. Bill is able to say something and have the person he's talking to believe it, and believe that they want to buy it. Bill does that better than anyone I know." Some, like Myhrvold, admire his ability to convey his vision to potential investors. "I used to joke he sold things before he built them, and once he sold it, he'd go build it," Myhrvold says. "I don't know if he liked that joke."

Others, like a former senior-level employee at one of Nguyen's startups, deride his mythmaking. "Many salespeople blur the line between reality and potential to move a deal forward. Bill seems to delight in willfully disregarding the line altogether," this source says. Nguyen admits to being an unreliable narrator, even of his own life. He's fine with that. "People who know me are like, 'You have the most selective memory I've ever seen,'" he says. "Like it's nothing but roses and flowers and peace and harmony. I don't remember any of the other stuff. I literally have no clue." Nguyen put me in touch with Rob Ryan, a tech entrepreneur who turned Ascend Communications into a multibillion-dollar company. Nguyen described Ryan as an early mentor of his. He told me he had gone to visit Ryan at his ranch in Montana to get some startup advice. "He was giving me all these rules of what to do, and I don't think I listened to any of them," Nguyen says. "But he gave me one that totally stuck. It was: Raise as much money as you possibly can." When I call Ryan to hear about the formative advice that has guided Nguyen all these years, Ryan tells me he has no recollection of Nguyen. Furthermore, he says that those words of advice are the opposite of what he preaches. "I won't get involved in companies if they're taking on a bunch of money. I call it OPM—other people's money," Ryan tells me, adding that in his view venture capitalists are toxic for startups. "An entrepreneur gets a whole host of money, so he actually starts to believe that he is a company because he has $20, $30 million in cash. In fact he has nothing. He's earned none of that money. None of it has come in through revenue, and none of it is profit."

I ask Nguyen to explain the confusion. "I guess his thinking has evolved," he responds, in a rare moment of sheepishness.

In August 2010, when Bain decided to become the first investor in what would eventually become Color, its partners didn't mind that there was no business plan or product. "[ Nguyen ] came and pitched all the partners. He basically just stood up in the room and described the vision of where the world was going and what could happen and what we were going to do," says managing investor Krupka. "We basically said, 'We don't know exactly what it's going to be, but we have confidence that we'll figure it out.'" Ralston, another early Color investor, describes Nguyen's elevator pitch: "His start was: 'I'm doing it, I'm ready, I'm going.'" I ask Ralston what the "it" was. "For me, with Bill, it is secondary because he's made me a true believer," Ralston says. Krupka reiterates the importance of Nguyen's track record in Bain's decision. "If someone who had never started a company before came in and said, 'Let me tell you where the world is going, I'm going to build this company, I don't really know what it is, so can you give me some money?', we'd say no thanks."

A faith in track records is what keeps the Valley spinning. "VCs tend to invest in people who've had good exits, who have successfully had their company acquired," says Bott. "If you've had two good exits, you know the person isn't a fluke. What's going on in the case of Bill is he has the reputation of somehow creating good exits out of things he touches, and that is magic for VCs. You'll invest in it even if you don't totally understand the idea."

"Color has become a punch line," concedes one Valley insider. "You can stand up at VC events and say, 'Color,' and people literally laugh without anything else being said."

"Silicon Valley just cannot get itself out of this trap of overfunding serial entrepreneurs," says Kedrosky, who likens the Valley's obsession with serial entrepreneurs to Hollywood's obsession with A-listers. "William Goldman famously responded to the question, How do you predict box-office success? with the answer 'No one knows anything. That's why Hollywood overpays for top-drawer stars.' The exact same thing happens in the world of startups. If you're a serial entrepreneur with at least one success behind you, you can almost always find a host of investors who will overpay for your next startup because nobody knows anything." In the case of Color, blind faith paired with a pack mentality and a fear of missing out. Color, says Kedrosky, "was just this magnificent confluence of everything the Valley likes to fund: It had pieces of what had made money for people before, which is to say mobile and photos; it had an experienced team; it had a multiple-success CEO; and it brought together some investors who were really eager to redemonstrate their bona fides."

And, says The Lean Startup's Ries, it had something known in the Valley as "social proof." "It's a euphemism," he says, "for a way of demonstrating to other investors that your company is doing well by saying who else is investing. Entrepreneurs know this matters, so they spend an inordinate amount of time strategizing how to get which investors on board and in what order, to give their company the appearance of success." Then factor in what Adeo Ressi of TheFunded, a VC blog popular in Silicon Valley, calls the phenomenon of the "pig pile," where competitive A-list VC firms are all fighting for the same investment. "It's not good enough to just get in the deal," says Ressi. "They view it as their victory is someone else's defeat. So you end up seeing these deals skyrocket." (Nguyen disagrees entirely with this. "There was no bidding war," he says.) Nguyen's pitch for Color also tapped into VCs' deep yearning for disrupters with the potential Google had in the late '90s. "There are lots of famous stories about people passing on Google because there was this perception that search was over," explains Kedrosky. "Now there's a whole bunch of people who feel that we're giving up too soon on social networks by saying that Facebook gets the whole playing field." In other words, if Google overturned Yahoo's search in the early 2000s, why couldn't Color usurp Facebook's social network in the 2010s?

"Is Facebook forever?" says Ralston. "No fucking way. Of course it's not. Is Google scared of Facebook now? Yes. Are venture capitalists willing to say, 'Is this that thing?' Sure. Of course. We ought to be. We have to be. That's the way the world works now. It's all connected, interrelated, and people will change fast. Does that mean there will be a post-Facebook world? I don't know. Will it be soon? Does it have to do with mobile? Maybe. Would I invest in a company that said, 'Hey, we have something that's different?' Yeah," he concludes. "I did."

Some 45 miles north of Lake Tahoe is a volcanic peak. It is there, in the Sierra Buttes, that Nguyen will seed his next vision. "I'm going to try to build a mountain," he whispers, flexing his eyebrows skyward. His plan is to turn this tract of wilderness into an Olympic Ski Center and donate it to the U.S. Olympic Ski Team. "I just want my 6-year-old to ski with Olympians to see if he's into it or not," says Nguyen. "I'll risk everything to see if that's what he wants to do with his life."

Nguyen's intense drive for money—and a lot of it—started early on. "My best friend had the ritziest house in Texas. I was like, Dude, I want this, I need this," recalls Nguyen. "I think some of my friends knew they would be a CEO. I never knew I would be a CEO. I thought I'd just be rich." Although Nguyen doesn't disclose his net worth—"It's more than what it should be," he smirks—money is no longer an obstacle, so he finds new quests in other things, like his son's ski mountain or the Hawaiian dream house he built over the course of a decade. The house is on an 18-acre property in Maui's Mokuleia Bay that sits next to a marine-life-conservation district. "We got state laws changed to actually build on the spot," Nguyen likes to point out. After selling Lala, he moved his family out to Hawaii, but they returned to Silicon Valley less than six months later because his wife hated it. "There's nothing about this house she likes. Nothing," says Nguyen. "She thinks it is emblematic of her husband, which is, He's obsessed with all things beautiful but cares less about whether it's functional or not." While Nguyen says his son, Jacob, is a great skier, he wasn't so glowing about the child's work in reading class. "The teacher was like, 'There are other things he's good at,' and I'm like, No, no, no, he needs to be the best reader in the class and he needs to be the best skier in the class and he needs to do everything the best," says Nguyen. After all, Nguyen's father, a military guy, taught him the value of winning when he was Jacob's age. Nguyen had finished second in a tennis tournament. "My dad takes the trophy and goes, 'Huh, first loser,'" he says. "So I got the message really young: You win. But my father took it much more seriously than I do." Now Nguyen is teaching Jacob "this concept that when your friends are goofing off, that's when you catch them. So every time you watch your friends goof off, pick up a book. Because they're resting, hunt them down."

As he himself tries to win at the CEO game, he's tracking his old friend and competitor. "I wish I could be as good a CEO as him," Nguyen says of Zynga's Pincus. "He's focused, he's disciplined, he's grown a lot. I haven't grown at all. I haven't matured five seconds' worth since the first time we met. I'm building skate ramps and cotton-candy machines, and Mark's implementing whole management structures. I'm obviously not as mature." When I ask him how he can improve his CEO chops, Nguyen's response is that for the first time he will "not abdicate the role" as he has done at his other startups.

"Bill's like an airplane," says Redpoint's Dharmaraj. "He really knows how to take off a company and he knows how to land a company, and in the middle he needs a pilot." Dharmaraj says Nguyen's typical pattern, as was true with Lala, is that once his startups are off the ground, he starts working less and spending more time with his family until he realizes "it's not going anywhere, so he comes back and fixes things, positions them, and tries to return the investor capital." Nguyen wants to believe that Color is unlike his other startups, that this time he's out to create something iconic rather than something to flip for some new cash. But he realizes he may not have the patience this plan demands. At Lala, he recalls, he and his executive team were sitting around one day discussing the miserable economics of the music space. "I said: We should just sell the company. They're like, 'That makes no sense, no one's going to buy it, Apple never buys anything,'" he says. "It took me two weeks, start to finish." Says one former colleague: "Bill is motivated by the adrenaline rush of the deal, about demonstrating his power to influence other people. In general, people motivated by a hunger for influence and control are not ideal leaders for building long-term value." Nguyen says he admires companies, like Netflix and Pandora, that have persevered longer than he ever could. "I make the same mistakes with every single startup," he says. "Sell too early, not patient enough, make some bad hiring choices; I make them again and again. Every time I do it, I think I'm not going to do it, but I keep trying. Maybe I'm the Don Quixote of startups." Now comes Color's reckoning, the moment when Nguyen's pivot will either soar or stumble. In late September, around the time of Facebook's f8 developers conference, Nguyen revealed the all-new Color, an app integrated 100% into the Facebook platform, which also features Peek (now officially called Visit). Days before we go to press, Nguyen is careful to clarify that the unveiling is not, in fact, a relaunch of Color, but a "preview demo." "I'm actually a little more cautious," says Nguyen of his plan B. "I don't want to turn our customers into guinea pigs again." He's taking a very un-Nguyen iterative approach, giving the app to 100 users—journalists and influential bloggers—who will test it while his developers continue to fine-tune it. Of course, this may also prove a handy way to co-opt his potential critics.

His investors seem encouraged. "Don't bet against Bill Nguyen," says Ralston. Still, the odds are against him. "I can't think of any example with this much money and that much attention invested where anyone's done a successful pivot," says Kedrosky.

Oddly enough, failure wouldn't be such a terrible outcome for Nguyen. "One of the things [LinkedIn founder] Reid Hoffman always says is that if your first product is not a complete failure, you're probably doing something wrong," says Ganesh Ramanarayanan, a Color cofounder. This is a prevailing philosophy in Silicon Valley; what's more, this forgiveness is one of the fundamental beliefs behind the idea that the American innovation process is flexible and great. Failure could actually bolster Nguyen's reputation. "People in the Valley find every reason to believe that a large failure just means you're more likely to succeed next time," says Kedrosky. "I often make the joke that if the financial industry ran like Silicon Valley, you'd have the guys who crashed the mortgage-backed-securities industry being handed billions of dollars the next day on the argument that, well, they must have learned a lot from crashing capitalism last time."

"The unfortunate thing about Silicon Valley," concedes Nguyen, "is that it isn't the best ideas that get funded, it's the people who do. I've been a beneficiary of that." The more money Nguyen gets, the more risk he's willing to take. "I never worry about the risk that much. The downside doesn't bother me," he says. "It's why I'm a terrible gambler. I don't do it very often, but a lot of my friends like to gamble. I just go to roulette and throw everything on one color. That's my bet. Whether I win or lose, that's it." His investors' bet on Color, he says, is all or nothing. "The goal of it is not to get a 1x or 2x return," says Nguyen. "It's not an in-between bet. You're either going to lose all your money or make up your entire fund."

Regardless of the outcome, Nguyen will continue to play the best game he knows. "The concept of a bubble helps us. It makes it sound more magical than it actually is," says Nguyen about the criticism that behavior such as his helps drive the Valley's forays into frothiness. "People leave really great jobs at places like Intel and Microsoft to go to startups. If the bubble didn't exist, no one would leave their real job to go work at one of these things. Why would they? It's totally the lottery. But it's better than the lottery because you get to do something about it. It's cool! You're the one rigging the machine and telling people what the numbers are." And while he has no need to make more money—"Every day is already Christmas anyway," he says—there is still one thing that bugs him: He's not a billionaire. Yet. "That's the thing," says Nguyen, the American dream sparkling in his eye. "I will outlast everyone else. There is no one in the world who I won't outlast. There's no way. There's no way. There's no way. I can take so much more punishment than anyone. I totally can. I can last forever. I'm like a roach."

A version of this article appeared in the November 2011 issue of Fast Company magazine.

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9Comments

Do I smell jealousy? What's the matter, jealous that we Viets are beating you white trash again? Plundering America's wealth with congames? Ohh you mean like those white men from Enron, Telecom and other failed "businesses" that cost MILLIONS of people BILLIONS of dollars?

In case you haven't noticed, Bill Nguyen, did NOTHING wrong. That's why he's not in jail but in his Maui dream home having sex with his beautiful White wife the likes of which white trash like you can never touch. Jealous? Good!

Nguyen is a no op. Sounds like a used car salesman who got lucky. Looks like luck can only take you so far... Even when you can "buy all the vowels", looks like you can't "buy" a successful startup. Some cool ideas from the company but the guy just sounds like a complete D bag to me... I would think Sequoia would be putting some thumbscrews on him by now

"People in the Valley find every reason to believe that a large failure just means you're more likely to succeed next time," says Kedrosky. "I often make the joke that if the financial industry ran like Silicon Valley, you'd have the guys who crashed the mortgage-backed-securities industry being handed billions of dollars the next day on the argument that, well, they must have learned a lot from crashing capitalism last time."Silicon Valley and mortgage security banks are different. The first one has a lot of upside and very limited downside (USD 41mn in Nyguen's case). Failure is a natural part of the process - as only 1 of 10 startups succeed, a failure of a startup does not mean a failure of execution. In mortgage securities, upside is fixed (interest), and downside can be huge. There failure means more negligence and incompetence, hence you don't fund a failed banker.